China: Steel exports rise over 30% y-o-y in Q1CY'24

China's steel exports in January-March 2024 (Q1CY'24) rose by 30.7% to 25.8 million tonnes (mnt) against 19.70 mnt in the same period last year, according to the China's General Administration of Customs. Moreover, export volumes in Q1 rose by 9% q-o-q against 23.68 mnt in Q4CY'23.

Export volumes in March 2024 amounted to 9.88 mnt, up by 25% y-o-y against 7.89 mnt in March 2023. In addition, the same rose by 24% m-o-m against 7.95 mnt in February 2024.

Factors influencing exports:

1.Sluggish domestic demand: Sluggish domestic demand for steel in China prompted a strategic shift by steel mills, who increasingly targeted the global market. While weather conditions in China are becoming more suitable for construction, lack of readily available project funds and delays in major construction projects have restricted the overall demand for steel. This suggests a potential lag in steel consumption despite the construction season.

Furthermore, the new real estate policies are being rolled out to stabilise the market, these measures are not yet translating into a significant increase in real estate investment activity. A longer period is likely needed for these policies to have a full impact.

2. Lunar holidays slow down demand: The Lunar New Year holidays, which fell over 10-17 February, this year, slowed down demand in China's domestic market. China's automobiles sales in February declined nearly 20% y-o-y to 1.584 million units as per data from the China Association of Automobile Manufacturers (CAAM). Moreover, sales saw a decrease of 35% m-o-m against 2.439 million units in January 2024, respectively. But, overall, auto production and sales in January-February 2024, rose 8% and 11% y-o-y.

3. Competitive export offers: In March 2024, China offered its Hot-Rolled Coil (HRC) for export to the Middle East (ME) at a competitive price of $575/t CFR UAE and Vietnam to $562/t CFR Ho Chi Minh City (HCMC). This was significantly lower than India's HRC export offers, which stood at $617/t CFR UAE and $599/t HCMC respectively for the same period.

Competitive Chinese export offers helped Chinese mills to capture global market and has also kept China's export volumes on a higher side.

Outlook:

China's steel export volume in March reached nearly 10 mnt, a new high in more than seven years and it is expected to remain on the higher side. China's steel exports appear positive, but long-term sustainability will depend on various global economic factors and steel production levels in other countries.